Morning Market Brief: Tuesday, May 9, 2023

Wildfires bring down oil production?

Intense wildfires in Alberta have prompted widespread evacuations from residential areas, causing massive disruption to many lives. The wildfires have also shut down several oil and natural gas wells and pipeline systems, which will lower the production of oil and other energy-related products.?

• The Province of Alberta declared a state of emergency as 109 blazes spread across the province, including 30 designated out-of-control, as of Sunday evening. Approximately 30,000 residents have evacuated these areas.
• The wildfires also affected energy production in regions close to the blazes. In total, there could be a production decline of 145,000 barrels of oil per day based on closures at Paramount Resources, Crescent Point Energy, Vermillion Energy, Pipestone Energy and Kiwetinohk Energy, among others.
• Energy products account for approximately 20% of Canada’s exports. Any prolonged drop in energy production could hurt exports, leading to a pullback in Canada’s economic growth. Canada has the world’s third-largest oil reserves.
• The energy sector on the S&P/TSX Composite Index ticked lower yesterday. Oil prices did climb higher.

These types of disasters have a significant impact on Canadians’ lives, businesses and the economy. Energy product exports are a key part of Canada’s overall economic health. A pullback in production could hinder trade activity, hurting Canadian growth. There could be some added volatility in the energy sector as a production drop could hurt profits for some affected energy companies. It’ll be important to find investments in energy companies that can withstand any potential short-term weakness.

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.